A summary of the basis and implementation of monetary policy is stated by the Federal Reserve:-

http://en.wikipedia.org/wiki/Federal_Reserve_System#cite_note-91

A summary of the basis and implementation of monetary policy is stated by the Federal Reserve:

The Federal Reserve implements U.S. monetary policy by affecting conditions in the market for balances that depository institutions hold at the Federal Reserve Banks...By conducting open market operations, imposing reserve requirements, permitting depository institutions to hold contractual clearing balances, and extending credit through its discount window facility, the Federal Reserve exercises considerable control over the demand for and supply of Federal Reserve balances and the federal funds rate. Through its control of the federal funds rate, the Federal Reserve is able to foster financial and monetary conditions consistent with its monetary policy objectives.